This mobile-app wave has affected not only consumers, but also insurance companies, many of which have launched mobile applications. These applications have utilized the key features of mobile phones—phone, camera, voice recording, video recording, and location identification—to bring additional value to consumers. They predominantly provide additional information or education to consumers and access to support functions, including claims processing. For example, GEICO's Glovebox provides policy access, billing access, claims submission and accident help to its consumers.
Unsurprisingly, the "moment of truth" in insurance is the claims experience. The extent to which a carrier can offer an effective and efficient claims experience distinguishes it from the rest of its competition. From an insurance carrier's perspective, a claims process involves five steps—notification, assignment, investigations, evaluation and settlement—and is fraught with challenges.
- It takes too long: The process on average could take 15 to 45 days (depending on the product line) if a settlement is reached and could take much longer if the process goes into litigation.
- It is too complex: For typical consumers, the details and complexities of the claims process often prove to be frustrating and quite daunting.
- The system is prone to fraud: Claims fraud is a major issue for the insurance industry. The Insurance Information Institute (I.I.I.) estimates that fraud accounts for $30 billion a year, or 10% of the P&C sector's incurred losses and loss adjustment expenses.
Any insurance carrier that can address these three challenges can reduce costs of claims processing and time to settlement, and can also positively impact customer satisfaction. Recent studies have shown that claims satisfaction was the second most important factor when choosing a carrier or renewing with a carrier across all income groups (See Figure 1). According to J. D. Power & Associates, a 50 basis point increase in the Customer Satisfaction Index could improve retention and referral rates by two percentage points. A recent J. D. Power study shows that among customers who had a positive claims experience with their auto insurers, nearly 65% said they will definitely renew their policy with their insurer and nearly 57% said that they will definitely recommend their insurer to others.
Three Development Fronts
Mobile technology has the potential to change (and to some extent has already influenced) speed, cost, fraud and customer satisfaction as they relate to claims processing. Mobile technology is developing on three notable fronts.
Mobile Phones and Apps
Mobile applications make it easy for consumers to notify their insurers of losses. For example, an insured can take a picture of an accident scene, tag it with the time and location, and send it to the claims department within minutes after an incident occurs. In addition, given the "hot" state of the consumer, the likelihood of fraud is reduced since people have less time to talk to others, pad their claims or alter their stories. (See Figure 2 for factors that impact claims satisfaction.)
Current mobile phone applications and future "tablet" solutions, such as iPad, will further enhance the capabilities of claims adjusters to investigate and evaluate claims much faster. Imagine an adjuster with a mobile device assessing the damage, sending pictures and other details to the home office, receiving authorization, and settling a claim on the spot—talk about speed to settlement.
Augmented reality (AR), or overlaying additional information onto a real set of data, will be the next evolutionary step for insurers. AR applications, such as Layar Reality Browser, can display real-time digital information on top of the real world as seen through the camera of the iPhone or Android device. Imagine the scene of an accident where you take a picture of the license plate and the app can overlay information regarding the insured, the car registration, and other relevant factors that can be sent directly to the insurer. Wikitude, from Mobilizy, can also be used to add Wikipedia-like information to any point of interest. Other AR applications will allow consumers to take pictures of their home contents, augmented with their estimated market value, for filing with the insurer for home and content insurance. Some insurance carriers could take this further by integrating this information with replacement goods that can be ordered online. These and other AR applications could significantly enhance the consumer's experience with notification, as well as reduce fraud by verifying location, value and documentation in real time.
AR applications that have relevance for claims adjusters are already in the market. These can overlay policy and coverage information in real time as the adjuster does his or her assessment at the point of incident. For example, overlaying real-time video of a flood-damaged house and its contents with identification of fair value or market value for specific household items can result in an immediate settlement. (See Figure 3)
Vehicle telematics (i.e., in-car communication technology), a decade-old industry, will be transformed by the ubiquitous presence of smartphones and other mobile devices. Software applications will emerge that will take real-time video feed from smartphones and link that to services currently offered by high-end telematics solution providers, such as GM's Onstar. Real-time video surveillance apps—such as Lextex's iRa, Senstic Systems' AirCam, and Smartvue's Mobile Surveillance app—can all be adapted to provide telematics solutions. For example, 911 emergency assistance services, immediate crash response, and real-time video recording of an accident could be provided using mobile applications. A partnership between Mercedes Benz and Hughes Telematics to create mbrace, an iPhone and BlackBerry application, is just the beginning. These consumer trends will carry over into the asset management and commercial fleet management sectors, allowing smartphones to be used for telematics solutions.
This technology has the potential to significantly decrease false bodily injury claims (especially in traumatic accidents where the "golden hour," or first few minutes after an accident, is critical), reduce fraud by providing accurate real-time video evidence, reduce theft-related claims, and improve speed to settlement.
The three development fronts are not necessarily sequential and are being developed concurrently; although, stages two and three clearly offer greater potential for investigative purposes and emergency response. If emergency services response, theft and fraud mitigation, and accurate assessment of claims can be improved by even 1% using mobile technology, the industry stands to save nearly $1 billion on losses and claims paid. That degree of savings gives new meaning to moving in the right direction.
Anand S. Rao is partner and Jamie Yoder is managing partner at Diamond Management & Technology Consultants.